is 20 years the new 10 year cycle??

Discussion in 'Investment Strategy' started by GLAM, 10th Jan, 2017.

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  1. Perthguy

    Perthguy Well-Known Member

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    Nov 2011 for me in Perth. Area started booming less than 12 months later
     
  2. thatbum

    thatbum Well-Known Member

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    Remembering back, I think a lot of the regulars on somersoft back then called the Perth boom fairly accurately. It was pretty easy to see it happening even as a beginner back then.

    Its a bit of a different story now - the rental yields just aren't there compared to 2011/2012.
     
  3. Gockie

    Gockie Sydney Airbnb superhost and Database talent. Premium Member

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    I think some of the reasons for recent booms in some locations are:
    * Removal of the FHB grant on existing properties,
    * The boom in mining,
    * The lack of well located affordable housing in Sydney yet people still need to migrate here for family and job reasons.
    * Melbourne also has strong migration due to jobs and family
    * Low interest rates meant that homes could be "affordable" to own as long as you have a deposit
    * Job market generally and health of the local economy. Which can come down to Government.
    * Money coming in from overseas cashed up migrants (around me, the vast majority of buyers are Chinese/Chinese heritage)
    * Infrastructure works

    There are probably other drivers but this is what I can think of just off the top of my head.
     
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  4. MTR

    MTR Well-Known Member Premium Member

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    Yes, we had a massive thread on it, the numbers went something like this a balanced market is around 12000 properties, boom time went down to 7000 properties.
    Amazing stuff, stock was low and demand was high
     
  5. Swamp

    Swamp Active Member

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    Got my curiosity going so had a look at a place I have in Brisbane purely because I have done virtually zero to it in the almost 8 years I have owned it. According to the latest val it has averaged 5% per year for 8 years so if that growth rate continues will double in around 14 years. I will need 17% growth for the next 2 years to make it a 10 year value double, possible i spose with where Bris is atm, will be interesting to see...
     
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  6. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    I buy property with a 20 year horizon so should get 1 or 2 cycles in that time frame.
     
  7. Marg4000

    Marg4000 Well-Known Member

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    The oft-quoted historical 10 year doubling is an AVERAGE over many decades.

    This may mean doubling in 17 years, then again in 3 years, which fits the 10 year average.

    No guarantee this cycle will continue.
    Marg
     
  8. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Also important to note that within a "10 year cycle" you will get the bulk of growth typically over a 2-3 year time frame.
     
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  9. Swamp

    Swamp Active Member

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    I have never seen any of this mythical 10 year doubling data, is it averaged over time, is it averaged over locations and time, doesnt matter to me I am in this for many decades, I was interested in my little n=1 case for Bris so had a little look :)
    I think this would be the case most of the time and think that will play out in my example. Kind of makes a mockery of the ole "time in the market not timing the market" which I find is usually spuiked by buyers agents etc trying to flatten there workload over a whole cycle (not the esteemed BA's on this forum of course the mainstream media tart types :rolleyes:)
     
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  10. WattleIdo

    WattleIdo midas touch

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    Beats Buy and Sell.
     
    Last edited: 10th Jan, 2018
  11. Perthguy

    Perthguy Well-Known Member

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    That's pretty much what happened to me in Melbourne except for mine: buy $300k in 2007, sold 600k in 2015, value ~$900k in 2017. It only really boomed in the last 18 months. So, a boom can be fast and brutal with lots of mediocre or negative growth in between.

    For people buying in Melbourne now, it is hard to see how the value will double in 10 years. But for people who bought 2 years ago I can see it
     
  12. dabbler

    dabbler Well-Known Member

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    I thought the prior Sydney cycles would be hard come by again....and then boom......

    I am at it again though, hard to see lower rates than current, hard to see increasing borrowing capacity and hard to see how it can be affordable, so am again thinking this last one would be hard to beat..... even a new mining boom would not change some factors that pushed Syd along, and Mel.
     
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  13. MTR

    MTR Well-Known Member Premium Member

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    This is what I hear often..... "you will never see a boom like this again", not so, a boom is boom, we will see it again, however may be different factors that cause the boom.

    Also investors forget the mother boom was in Perth in 2001-2007, some investors doubled their money in 12 month. This combined with lo doc/no doc environment what a windfall for some investors in this market.
     
  14. devank

    devank Look, lets just get on with this, ok? Premium Member

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    In the past, we had higher interest rate. Maybe, that's why properties had to double in a shorter time frame.
     
  15. dabbler

    dabbler Well-Known Member

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    I am more of a pessimist than that, I do not think it is rational to think that there can always be booms and only upward growth, the credit environment has just been cut back & you would have to conclude, that credit, low rates and mining etc all contributed to last boom/s, not normal rates and wages growth, we produce near nothing now, import everything.

    Could well boom again, but increasingly I know people with good incomes who cannot buy & when they are near middle age and still cant buy, and real trend seems to be wages stagnant or dropping, then you have to wonder how long this can go on, I am mainly saying, I think it has been too fast and too much tied to rates and other conditions that will not likely always stay as good as they have been. Certainly credit has changed, I think it has potential to unwind a lot in near term.

    So yes, growth spurts, but can't right off possible drops too, meaning a position of going nowhere fast.
     
  16. UrbanPlanner

    UrbanPlanner Member

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    We bought our first house in 2011 in Dianella - worst house in best street situation, mortgagee sale, previous offers fallen through, lowballed hard and got lucky as the market was shot. Lived in and renovated then used equity and bought another duplex in same area 2013 at the start of the 'mini-boom' (keyword mini), bank val 18 months later was up $120k so used equity for a deposit on a house in Stafford Heights, QLD. But Dianella duplex probably not worth much more than we paid now so will ride it out as was always a long term play. It did facilitate the Bris purchase which was good (in hindsight should've been Sydney but oh well).

    Sold the first Dianella house 2 (ish) years ago just before things got bad in Perth, paid down some debt and and bought a small block in Leederville and built PPOR. Luckily we'd bought well initially so had a sizeable deposit for small block in Leedy and with construction costs heavily discounted, it was the perfect storm. I think luck played a big part in the timing of purchase and sale of the first Dianella house as it wasn't a conscious effort to time the market at all
     
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  17. UrbanPlanner

    UrbanPlanner Member

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    Sorry slightly off topic I know. Before the 2013/14 mini boom, Perth's last (huge) boom ended around 2007 as others have mentioned. Sentiment here is increasingly on the improve so I would expect the market to pick up in the next few years but will be fragile unless conditions change to really drive growth. Let's say next boom in Perth is 2020+, that makes it 13-15 years between booms (without counting the mini one). 2020 is just a nice round date and have no basis for it at all other than perhaps optimism :p
     
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  18. Redom

    Redom Finance Strategist Business Plus Member

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    Depends on what will happen to the credit environment over time & what financial system innovations come through. Underpinning the last 3-4 of the '10 year cycle' process has been an expanding credit environment. Its expanded for a number of reasons (financial system innovation, inflation targeting introduction, demographic changes, etc). Trying to assess how long a cycle takes is a lot of random guesswork. Looking deeper into the drivers is still lots of guesswork, but it may help make guesstimating clearer.
     
  19. WattleIdo

    WattleIdo midas touch

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    Exactly. It's less about herd mentality and more about prevailing financial and economic conditions. Most of us can't buy if we can't get a loan. Then when we do buy, it's usually where lots of people are renting.
    Never listen to someone who thinks they know better than everyone else. It's that simple.
     
  20. MTR

    MTR Well-Known Member Premium Member

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    Sounds good.
    Melbourne has had spectacular growth as well. Syd and Melb best markets to play in for sure. Lets see what happens this year
     
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